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We usually argue that we'd like to have a simple tax system so that people can actually see what it is that they have to pay for whatever it is that they're getting from government. There are further subsidiary arguments in favour of simplicity: ease of calculation, low distortionary effects and so on.

But there's an intriguing argument that actually we'll find human happiness, that maximised utility which is the goal of all economic policy, to be highest if we had an even more complex tax system than the one we have. For this would allow those who really don't like being taxed to practice even more tax avoidance and thus be even happier. It is indeed an odd argument but it has the glorious possibility of actually being a true argument.

This paper is the first to provide evidence of efficient taxation of groups with heterogeneous levels of 'tax morale'. We set up an optimal income tax model where high tax morale implies a high subjective cost of evading taxes. The model predicts that 'nice guys finish last': groups with higher tax morale will be taxed more heavily, simply because taxing them is less costly. Based on unique cross-country micro data and an IV approach to rule out reverse causality, we find empirical support for this hypothesis. Income groups with high tax morale systematically face higher average and marginal tax rates. To the best of our knowledge, this is the first paper to investigate whether differences in tax morale affect the distribution of the tax burden across different groups of taxpayers.

We have different groups across the economy who have different willingnesses to pay taxes. Some would gladly pay more in order to provide even more lavish pensions for politicians, just as an example. Others begrudge even those few pennies that stop small children from being forced up chimneys to earn a crust. It's clearly impossible to satisfy both groups at the same time with one simple tax rate.

The authors of this paper are proving that those who, at worst, don't mind paying a bit of extra tax in fact end up paying that extra tax. As they don't go around avoiding and evading those taxes. However, now add this insight:

Study a model economy where households have heterogeneous tax morale. It should come to no surprised that under such circumstances and if the tax authority can discriminate in this regard, it will tax more heavily those that are more willing to pay.

The next statement is also true, that more tax inspectors will squeeze more money out of those who don't like paying taxes.

However, remember, our aim with all of this economy stuff is to maximise utility. Which means that what we'd really like to have is a system which does indeed disciminate between those who like paying taxes and those who don't like paying taxes. And if we've got a system that can so discriminate then we'd like those who don't like coughing up to be happier by not coughing up and those who do like handing over the cash to be happier by handing over the cash.

So, how might we do this? We can't quite make the whole thing voluntary for very few indeed are that enamoured of paying already rich retired politicians very large pensions. So we need a method of discrimination: and a complicated tax system is exactly that.

In a complicated tax system, with lots of allowances and exemptions, we'll find that those who don't mind very much won't go to any great length to reduce their tax bills by claiming those allowances and exemptions. Those who do mind a lot will tie themselves into contortions to make the greatest use they can of such loopholes.

Which leads us to being able to a) distinguish between the two groups entirely through their own actions and b) charge the different groups different tax rates and thus c) maximise human utility.